Cipd Reward Mngmt

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A free sample chapter from Reward Management , 2nd Edition by Stephen J Perkins and Geoff WhitePublished by the CIPD.Copyright CIPD 2011All rights reserved; no part of this excerpt may be reproduced, stored in a retrieval system,or transmitted in any form or by any means, electronic, mechanical, photocopying, recording,or otherwise without the prior written permission of the Publishers or a licence permittingrestricted copying in the United Kingdom issued by the Copyright Licensing Agency.If you would like to purchase this book please visit www.cipd.co.uk/bookstore.

approach an area of people management that is as complex as it is fascinating.As media headlines daily attest (Issue in Reward 1.1), people who deal in paydetermination seem to regularly disappoint. Tis is in spite of the welter ofanalysis from academics and advice from popular commentators. Why thedisjunction? One likely culprit is the potentially bewildering array of reward

management alternatives to consider. And like any other area of peoplemanagement, while on the face of it self-evident, its worth remembering thatthe focus of attention is people. People managers and employees in alltheir diversity interpret and act on their impressions of the world of work andorganisation and ways of bringing order to these socio-economic institutions,inuenced, in turn, by their unique character and situation.

Although numerous attempts have been made to do so, and managementsand other stakeholders may judiciously seek to minimise the risk of error, theconsequences are not easily predicted. Also, like the people who populate them,the contexts for work and organisation are varied and continuously evolving.

Patricia Zingheim and Jay Schuster, US-based authors and managementconsultants, use their book title Pay People Right! (2000) as a rallying cry toemployers to ensure that reward management systems are fundamentallyin alignment with their organisations strategic goals. Subtitling the volumeBreakthrough reward strategies to create great companies, they also argue thatpay is a powerful communicator of values and directions. Tis commentary(referred to as a normative view, advocating the use of specic reward plans andpractices on the basis that choosing these is the right thing to do) builds on asimilar line of reasoning by the same writing team a decade earlier. Te New Pay (1990) popularises the work of Edward E. Lawler III, Distinguished Professorof Business at the University of Southern California, who writes the Foreword.

Schuster and Zingheim (1992) open with a statement similar to the one in the2000 volume: Pay provides organizations with a powerful communicationsopportunity. . . Tose responsible for managing employee reward are told theyneed to answer one question only: How can we nd ways in which the workforcecan share in the organisations success? Tis is juxtaposed with a straw manteaser: Do we wish instead to offer employees anxiety, lost trust and discontent?Reward (generally referred to in the USA as compensation) is put forward as theaccelerator pedal for an enterprise to speed the business process and success, ameans of making company performance initiatives . . . real (xv). It is part of theformula people look for ( ibid ) when evaluating whether or not to work for anemployer (and by extension whether to stay with it and to work in ways aligned

with the employers expectations). Te authors provide what they describe as aroad map metaphorically to help users navigate towards attainment of the greatcompany promised in the subtitle.

We share the view that the choices employers make between the rewardmanagement alternatives open to them explicitly and implicitly have thepotential to signal managerial priorities and intentions to all stakeholdersin formal organisations. Tat includes at least implicitly communicating theassumptions shared by organisational leaders and those to whom they are


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Introducing the Reward Management System 3


accountable (whether these are governments, private investors or trustees)regarding the role and nature of the people wanted to perform work to full thecorporate purpose and the basis on which value created will be distributed.

Te term reward management itself is signicant, implying an active role foremployers not one in which external forces of supply and demand in jobsand workers regulates employment. We will see in the next chapter, when wediscuss theoretical approaches to help evaluate reward management ideas andaction, that thinking varies over the role if any for managers in determiningwages and other payments to people related to employment. Caution is neededto avoid reading too much into rhetorical statements to the effect that adoptingthe right reward practices will produce outcomes that are equally universal inthe perceived benets to the various parties. Even Zingheim and Schuster addthe caveat, somewhat mixing metaphors in doing so, that their reward-businessprocess accelerator . . . isnt a quick x (2000: xvi). Tey suggest that Much of thepopular literature on management . . . avoids issues of pay, perhaps because itsharder to address than many of the gentler and less powerful change tools (2000:xvii). Note here the implication that reward management is associated withprogressiveness: travelling from one organisational state to another. Tose longsceptical of new pay discourse (ie writing intended to persuade to a particularworld view, not one shaped by a plurality of interests and contexts) have arguedthat advocates practices may be associated with psychological outcomes of the very sort Zingheim and Schuster (2000), for example, say they wish to eradicate:in particular, a sense of personal anxiety when faced with pay that remainspermanently at risk (Heery, 1996).

Te remainder of this chapter is organised to satisfy three main objectives. Firstis to clarify meaning(s) attached to employee reward management and the links

with relations around employment, accounting for chosen orientation(s) towardsworkforce members. Secondly, to scrutinise repeated references to rewardsystems, and then to appraise the utility of long-standing systems thinkingto help assemble and interpret material on the alternatives, consequences andcontexts for employee reward. Tirdly, eshing out the Book plan diagramlocated just before the beginning of this chapter, to outline the structure andcontent of the subsequent four parts arranged over another 11 chapters that makeup the book.

loca t ing ideas and prac t ices around rewardmanagementLooking at the basics, we briey discuss the terms employee reward and rewardmanagement. Employee reward represents one of the central pillars supportingthe employment relationship (Kessler, 2005): its management is likely to inuencethe character and quality of that relationship and its outcomes.


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Employee reward(s) may, however, be differentiated between:

extrinsic , tangible or transactional reward for undertaking work inemployment, on the one hand, and

intrinsic reward derived from work and employment, on the other hand.

Extrinsic reward in the form of salary, incentive pay and benets serves thepurpose of directly recognising the comparative value of organisational roles andthe contribution individuals may make in performing them. Extrinsic employeebenets and perks delivered in a non-cash form (eg company cars, paid holidayand health care), or deferred remuneration (eg predened occupational pensionbenets or equity share-based rewards that may be nancially realised at a futuredate), may reect managerial efforts to keep rewards competitive, intended to

recruit and retain sufficient employees of the right calibre, and to secure workaccomplishment for the organisation. Benets may also reect an employersinterest in employee wellbeing. Te nature and combination of extrinsic rewardis dynamic: for example, present-day contributions to an employees portableretirement income fund may be offered in place of a company pension, reectingthe increasingly exible employment relationship.

Intrinsic reward may be further subdivided (Kessler, 2001). On the one hand,environmental rewards may be manifested in the physical surroundings in whichwork is performed, combined with other factors, such as the values displayed inthe workplace by organisational leaders and work supervisors, and perceptions oftheir leadership quality. On the other hand, development-oriented rewards that tendto be more individually directed may be offered to recognise employee aspirationsto receive learning and development opportunities, and to gain acknowledgementof outstanding work and build feelings of accomplishment wherever possibleconsolidated tangibly through career advancement (Milkovich and Newman, 2004).It is agued that extending the features of employee reward beyond those speciedin the economic contract may help to secure employees discretionary effort(Wright, 2005: 1.2.2). Tis intrinsic or psychological contract in work relationships(Levinson et al , 1962; Schein, 1965; Rousseau, 1989, 1995) features in commentaryadvocating attention to the total reward proposition (see Chapter 9).

Employee compensation, remuneration or reward (terms that may be usedinterchangeably in the literature) may be dened as all forms of nancial returnsand tangible services and benets employees receive (Milkovich and Newman,2004: 3).

Work under an employment relationship is undertaken in return for pay (Ruberyand Grimshaw, 2003: 12). But the nature of this exchange relationship (Steersand Porter, 1987: 203, emphasis in the original) implies more than an economictransaction.

Employee reward may be perceived as an effort bargain (Behrend, 1957;Baldamus, 1961) between the parties to the employment relationship, needing to becontinuously renewed on both sides.

d e f i n i t i o n s


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employee reward levels vs labour cos ts

Pfeffer (1998) sought to correct what he termed certain myths that he suggestedmanagers may incorrectly embrace in thinking about rewarding people employedin organisations. He was at pains to point out that rates of employee reward are

not the same as the costs of employing someone. It is possible to pay higher ratesof reward to employees compared with a competitor and yet have employmentcosts as a proportion of the total costs of running an organisation that arerelatively lower. Te key ingredient is productivity that is, what the employer isable to achieve in terms of efficient and effective output from the workforce foreach component of a persons capacity to work.

Pfeffer (1998) gave as an example the comparative position of two steel millswhere one pays higher wages than the other but keeps the overall cost ofemployment at a managerially acceptable level by requiring signicantlyfewer person-work hours to produce a similar amount of steel. He added thatthose managers who subscribe to the rst myth tend to embrace a secondmisconception that by cutting salary and wage rates they can reduce theirlabour costs. However, as he argued (Pfeffer, 1998: 110):

I may replace my $2000 a week engineers with ones that earn $500, but mycosts may skyrocket because the new lower-paid employees are inexperienced,slow, and less capable. In that case I would have increased my costs by cuttingmy rates.

Te problem as perceived in Pfeffers (1998) terms implies the need formanagerial interventions active engagement to ensure that not only is employeereward specied and determined. Management also is required to ensure that allparties interested in the effortreward bargain understand what intentions followfrom what is on offer and what the implications are in what will be rewarded andhow rewards will be delivered.

Reward management may thus be simply dened as the combined actions anemployer may take to specify at what levels employee reward will be offered, basedon what criteria and data, how the offer will be regulated over time, and how boththe intended links between organisational goals and values should be understoodand acted on by the parties to the employment relationship.

d e f i n i t i o n s

s i tua t ing reward management sys temical ly

In this book, the reader is offered a way of situating the problem of rewardmanagement (by which we mean patterned activity to be specied andunderstood, to inform action) within the context of argument and evidencerelated to the employment system. In fact the system is multidimensional: it isat the least one that reects the national and international environment within


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Reward Management6


which employees are contracted to work and employers need to manage theiractivities. By denition that system is diverse, and we should not assume thatit is immune to effects from beyond the immediate arena of organisation andemployment. Wider economic, political, social and technological phenomena set within a historical period, itself affected by past times create a dynamic

setting that employers and the people management specialists who advise themneed to take into consideration when evaluating the alternative approaches tomanaging employee reward and the expected return on investment and otherconsequences that follow. And employment systems will be encountered ata variety of levels below the macro level eg industry sector, organisation,workplace each of which is likely to be just as diverse, reecting the range ofpeople and situations involved. We discuss the dynamic contexts for rewardmanagement in greater detail in Chapter 3.

Commentary in the human resource management literature frequently refers toreward (or compensation, pay or remuneration) systems (eg Boxall and Purcell,2003; Heery and Noon, 2001; Kessler, 2005, 2007; Marchington and Wilkinson,2005; Milkovich and Newman, 2004; Ulrich, 1997). But as Robert Persig observesin his classic text Zen and the Art of Motorcycle Maintenance: Teres so muchtalk about the system. And so little understanding. We can nd little in thepublished debates among commentators in the eld that explicitly justies whya systems view of employee reward is appropriate, or using ideas that have theirroots in general systems theory (von Bertalanffy, 1969). Tis is despite the factthat, as Meadows and Wright (2008: xi) point out, oday it is widely acceptedthat systems thinking is a critical tool in addressing the many environmental,political and social, and economic challenges we face around the world.

While pursuing a search for underlying regularities that characterise the world

in general, Ludwig von Bertalanffy a biologist and the founding father ofgeneral systems theory adopted the system as an organising concept tohelp overcome differences between different academic disciplines (Burrell andMorgan, 1979: 58).

A system is formed from elements and parts that are organised andinterdependent (Holmwood, 2006: 587). Systems can be either closed or open.Closed systems are exemplied by conventional physics that isolates systems fromtheir environments for example, the controlled experiment where phenomenaare exposed to testing but isolated from the places in which such phenomenanaturally occur. Closed systems, von Bertalanffy (1969) argues, will by denitionbecome independent from their environment, but this will undermine attemptsto understand the system as a dynamic phenomenon in continuous interactionwith other, contextually linked, systems. As Haines (1998) points out, this kindof reductionist thinking (isolating the elements of a system for analysis to theirmost basic trait and then reassembling the answer without consideration forthe inevitable infection that will affect the phenomenon once returned as awhole to its environment, colliding with other systems) can lead to perverseconclusions. For example, if we offer short-term cash incentives to nancialservices executives, it may be assumed that their resultant behaviour will benet


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the rm. However, without moderating factors including acknowledging thetime-lapse between apparent outcomes and actual value creation or destruction,such hermetically sealed incentive programmes may encourage individuals to actin ways that, when ignoring risk becomes endemic to this category of employee,may plunge the whole system into crisis.

In direct contrast to a closed system, an open systems approach draws attentionnot just to the structure or substance of phenomena but to the processes thatimpact on the system, and its impact in turn on those other systems with which itinteracts. Open systems engage in transactions with their environment, importingand exporting and changing themselves in the process, continuously buildingup and breaking down . . . component parts (Burrell and Morgan, 1979: 59). Tus,open systems theory offers a route for studying the pattern of relationships whichcharacterise a system and its relationship to its environment in order to understand the way in which it operates and so to discern different types of open system inpractice (Burrell and Morgan, 1979: 59; emphasis in the original).

Controversy regarding the use of incentives to reward certain employees innancial services illustrates the potential hazards of regarding a reward system asclosed or self-contained. As is discussed in the second chapter, classic economicstheory on wage determination assumes away environmental factors (or context),to consider employment market transactions in the abstract, using the allother things being equal clause. And ideas from psychology such as Vroomsexpectancy theory (also considered in the next chapter) may be seen as drawingon the systems input-transformation-output-feedback model: an incentivesystem may be designed on the basis of assuming that desired behaviour willresult provided the individual can see what is expected, the extent to whichachievement is realistic given available resources, and whether they nd the

incentive offered of sufficient value to them. But again, there is a need for cautionin extrapolating from such theorising reduced to the individual disconnectedfrom the wider social context for example, conditioning what is deemed valuable and the degree of contribution required and the trust the individualhas in managerial representatives to honour the bargain, derived from priorinteractions with peers and superiors.

Te conceptual lynchpin of systems thinking . . . is that all systems are circularentities. Tis concept, which is based on the actual nature of systems, isintegral to the input-transformation-output-feedback model that forms the framework for systems thinking . . .

In viewing our organizations . . . as levels of systems within, and colliding with,other systems, we align ourselves with the principles of openness, interrelation,and interdependence, and so cement the systems concept. When problem-solving, we look forpatterns of behavior and events, rather than at isolatedevents, and we work on understanding how each pattern relates to the whole.We begin to see how problems are connected to other problems and are forced to look at solving those problems in a new light. In fact, the solution toany systems problem is usually found at the next highest system.

(Haines, 1998: 28391)


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Reward Management8


Mindful of these factors, suggesting the importance of paying attention tothe hierarchy of systems (or the environment) within which they function,interpreting reward management systems as open may be more realistic in thecontext of the contemporary economy. Organisations and their sub-systemsinteract with an increasingly interconnected division of labour across a capitalist

world system (Wallerstein, 1983), in which organisations of different sizes andstages of development enter into a diversity of employment relationships withpeople in locations that are also at various stages of development and change.

Consistent with the integrationist HRM approach we discuss in Chapter 12,within the organisation itself reward management systems may be deliberatelylocated as in continuous interaction with internal environmental conditionsderived vertically from corporate strategies and horizontally from other peoplemanagement structures and processes, not to mention the interactions withregulatory system expectations introduced to the organisation from the externalpolitical economy. Depending on the viewpoint of the commentator, the directionof inuence vertically and horizontally is debatable. Nonetheless, ideas fromopen systems theory may help encourage reexivity around employee reward.Whether or not specically goal-directed, a reward system may evolve, regressor disintegrate, not only experiencing change itself but also possibly inuencingchanges to an organisational environment, possibly spilling over into an externalemployment and business system in the process.

An example of this may be the arrival of a large multinational corporation ina developing or transforming economy, where the inward investors and theirmanagerial agents may introduce practices that begin to reshape a competitiveenvironment for effortreward bargaining. Choosing between a closed or opensystems perspective has important consequences for the underlying assumptions

accompanying the theories that help to interpret and understand how and whyreward systems function. Teorists debate alternative explanations for adaptationwithin and between non-static systems, including provisions for addressingconict and creating consensus among the actors within the system, underscoredby the institutional context for reward management (see below).

criticisms of systems thinking

Despite the inuence that the systems approach has had on various branchesof management and social science since the mid-twentieth century, systemstheory may be criticised when its users do little more than propose the reduction

of complex phenomena to elements that may be observed and where possibleexperimented on, while promising not to forget that in reality the parts must beconsidered holistically and in interaction (Burrell and Morgan, 1979).

Within the social sciences, grand theory-building attempts to explainmodern society in systems terms by American sociologist alcott Parsonsin the 1950s have been criticised for the implicit assumption of converging values among populations which, given the diversity of people within andacross the worlds nations, lack empirical grounding (Abercrombie et al ,


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2000). A prediction that societies would come to mirror the industrial andemployment system characteristic of the USA (Kerr et al , 1964) has remainedcontroversial. Important criticisms are associated with the potential of analyststo confer a self-determining (or reied) status on socio-economic systems,over-emphasising systems while neglecting action (Holmwood, 2006). In the

second chapter in this part of the book, for example, we take a critical look at theclassic labour economists view that vests ultimate authority in market forces inregulating the employee reward system.

Another important criticism has been the argument that social systems theoryis couched in conservative ideology, and lacks the capacity to deal adequatelywith the presence of conict and change in social life. Tis latter point may beanswered to some extent by reference back to the more sophisticated project onwhich von Bertalanffy embarked. Attention may be paid to sources of inuence,for example, in settling the terms of the effortreward bargain. Te necessity forindividuals to interpret aspects of both the extrinsic and intrinsic employmentrelationship implies that while management, as the keepers of organisational andemployment resources, may enjoy a dispositional advantage in framing the offer(Edwards, 1986), the position remains indeterminate (Shields, 2007). Managersmay not be assumed to act consistently, and employees may interpret their rolesin ways that have unforeseen consequences in line neither with the intendedcorporate strategic nor a lateral HRM direction.

For the purposes of shaping discussion in the present book, while not ignoringthe limitations of a systems perspective as this may be applied to rewardmanagement, it seems appropriate to remain sensitive to the ways in whichreward management design elements interact with one another, and with othersystemic features observable at various levels of environmental analysis (eg those

connected with managerial strategy and with other human resource managementdesigns and activity inside the organisation; and with economic markets, andother institutions, such as the law, shareholders, trade unions, etc, locatedexternally). In voluntary associations of purposeful members who themselvesmanifest a choice of both ends and means to achieve organisational outcomes(Gharajedaghi, 1999: 12) the parties may be viewed as seeking to regulate theeffortreward bargain, processing information and learning from feedbackmechanisms within an open system setting (Haines, 1998), to modify and renetheir orientation to the employment relationship. It is our contention that whatthe CIPD terms thinking HR performers CIPD (2007) will benet from bearingthis in mind when reecting on theory and practice in connection with reward

management systems.In summary, we have chosen to focus on open, dynamic systems within whichreward management can be practised (not regarding reward systems as sealed vacuums to be acted on as though constituting laboratory settings) so as to helpreaders of this volume to grasp the fact that more is in play than management asa process within which to determine predened outcomes.


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rewarding the employment re la t ionship

A fundamental principle associated with designing and administering (anotherexpression for managing) employee reward is that these activities are undertakenwithin a complex set of people and organisational interrelationships a seriesof interconnecting systems coinciding around the employment relationship.Managerially, the intention we may assume is to design reward so that it acts,

in alignment with other features of human resource management, to securethe strategic intentions of the employer, so as to get things done throughsecuring and deploying the capacities of people working individually and ingroups. It follows from describing the social context for managing employmentrelationships and the reward dimensions, however, that although the intent maybe strategic, the diversity of people and settings logically gives rise to risks that as people interpret their roles and the intentions of others with whom theyinteract outcomes desired by organisational designers and leaders may notautomatically appear in practice.

Whereas organisation leaders may deploy what management guru Peter Druckercalled their theory of the business (aka strategy), managers at each level betweencorporate and front line and, in turn, employees generally may apply theirown criteria to work out how to engage with it. And it would be unwise for anybusinessperson to assume that the engagement is unfailingly consistent withcorporate intentions. A complex mix of demographic, economic, social and relatedcircumstances including feelings towards co-workers and managers, includingoccupational and professional allegiances act as prisms through which people viewwhats on offer and whats expected of them in return. As we will see throughoutthe text, interpersonalorganisational comparative factors impact on sense-making.Prominent among these are considerations of equity (Does how Im treated feelfair?), associated with factors such as ethnicity and gender, and cultural normsand values across social and geographical spaces internationally (How does myworld-view interact with the employer and other key stakeholders?). A high-levelinvestigation commissioned by the UK coalition government, led by a well-knowneconomist, Will Hutton, whose interim report was published in December 2010,has been exploring questions specically intended to set some standards for judgingfair pay. And pressure is building for employers to submit to equal pay audits in theface of a continuing gap between levels of pay enjoyed by men and women in theUK workforce, and the focus seems set to broaden to questions around equality andfairness more generally. Te University of Kent has gone so far as to publish its rstever equal pay audit, conducted in 2008 (University of Kent, undated):

student (group) exercise

Discuss the benefits of approaching the analysis of reward management systems as proposedabove.

Considering the criticisms we have sketched, why do you think a systems approach may havebeen popular among social analysts?


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Te purpose of the audit was to help the University identify any pay inequitiesarising because of gender. Future equal pay audits will have a wider scope toalso include race and disability. Te recommendations from the report will beused to assist in reviewing our practices in relation to pay and grading policiesand procedures.

Te scope for what Knights and McCabe (2000) label an interpretative gapbetween reward management designs and how people interpret and react to themis likely, even if at face value the managers and employees espouse a strong senseof what academic commentators have labelled organisational membership (orcommitment to corporate aims) and citizenship behaviours (helping those withwhom they interact in an unselsh way). Peoples orientation to work why theywork and the values they bring to the employment relationship and their senseof vested interest in accepting the offer of an employment contract, characterisedby each persons demographic as well as economic circumstances are factoredin by managements who understand that the employment relationship is at rootindeterminate (Marsden, 1999).

Managing people purposively in organisations, under an employmentrelationship, reects what over half a century ago economist Hilde Behrend(1957) described as an effort bargain. While the formal agreement to work foran employer may specify explicit terms, and may be accompanied by statementsthat describe the job to be performed, the way the bundles of tasks should beapproached, and the performance expected, in practice a negotiation is takingplace. Tat negotiation may reect the employers strategic expectations. Butit also will be inuenced by the employees interpretation of what is offered implicitly as well as explicitly, accounting for psychological and social in additionto economic exchanges. For example, the extent to which the employee judges

the deal to be worth it to them measured against unique benchmarks, and a just return on the commitment and capability to work they are investing, inturn needs to be accounted for in designing the reward proposition (a term wewill explore in the course of these pages, culminating in a chapter on so-calledtotal rewards) and how it is administered across the variety of people andsettings within which employment (and reward) relationships are to be found.Te implication is that while these days reward management choices are fairlyextensive, there are limits to the packages and modes of delivery to select from.Te variety of characteristics attributable to the managers who oversee themand the employees who are targeted for such interventions (characterised forinstance by age, ethnicity, gender, bodily status and orientation) and the sectoral,

national, regional and global settings inhabited, are in contrast potentiallylimitless. Recognising this gives pause for serious reection. What may work toproduce specic outcomes among one group and in one setting may result in acompletely different set of interpretations and outcomes and be accompanied bythe need for variation in how to approach the effortreward bargaining processwhen transplanted to people and settings elsewhere.


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reward management in media headl ines

i s s u e s i n r e w a r d

1 . 1 In October 2010, the retiring director-general of the UKs employers group the CBI

called for a global ceasere between banks over payments to mega stars. Toavoid a accusations of toxicity at a time of pay freezes and job losses in the publicsector a sense of fair dealing was needed, Mr Lambert said, to rebuild public trustfollowing the global nancial crisis. Carrying on with business as normal (in thesense of large bonus payments) would seem arrogant and out of touch, he added.Only if the sectors employers agreed to act collectively with restraint and not topoach employees disaffected at seeing their pay levels curtailed could the recipefor regeneration be successful. Here it may be perceived that political factors arebeing expressly privileged alongside economics, with institutional action amongemployers collectively running contrary to at least a quarter-century of marketforces rhetoric.

Source: FT.com October 2010, Brian Groom, Business and Employment editor. CBI

chief urges bank bonus ceasereExecutive pay was placed in the foreground of plans announced by the UKgovernment in October 2010 to overhaul a state-owned private equity investor:CDC (founded in 1948 as the Colonial Development Corporation). The institutionhad been criticised in the tabloid press over the pay and expenses of its topexecutives, the Financial Times reported on 12 October. The espoused aim ofthe group is to reduce world poverty while making profits. However, criticssuggested that it had lost its way . . . enriching its executives in the process.Its chief executive a former private sector investment banker earned almost1 million in 2007, although he had waived part of his bonus in the subsequenttwo years, taking home 494,501 in 2009 (while claiming expenses of 7,414).Although this financial services organisations executives appear to earnpayments well below those reported as awarded to private sector counterparts,again the political appears to have overshadowed the influence of economicmarket forces in securing, retaining and motivating talent. In this case thesituation may be seen as compounded by the fact that the employer ultimately isthe UK government.

Source: FT.com 12 October 2010, Martin Arnold, Private Equity correspondent. CDCfaces shake-up after anger at pay

In another case of a government-funded enterprise acting under criticism for its paymanagement at senior levels, in October 2010 the FT reported action by the BBC toaddress criticism of excessive management salaries. The pledge reported was toreduce senior managerial costs by 25 per cent.

Source: FT.com 12 October 2010, Ben Fenton, chief Media correspondent. BBC tolay off deputy director-general

And reward management controversy is certainly not solely a UK phenomenon. InAustralia on 8 October 2010 the Financial Review reported that about 1,000 peopleemployed in the states health service protested outside Queenslands ParliamentHouse for better pay, while inside the building the Health Minister protested inreturn that the group were the highest paid in the country, paid $30,000 abovecomparator groups in the neighbouring state of New South Wales and $55,000


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13


inf luences on employee reward th inking

Much of the literature concerning employee reward is informed by the twindisciplines of economics and psychology (reviewed in depth in the next chapter).Our introductory remarks, however, signal the presence not only of phenomenaconcerned with macro-economic market transactions and/or individual micro-perceptions and responses but also of ethical, moral, political, social andtechnological factors as well as managerial strategies and responses from

parties to employment systems. Te parties include nance capital investors,governments, trade unions, and other stakeholders. Interest groups may adopta variety of starting points in their approach to employee reward managementand the way it can be objectively discovered and determined or subjectivelyinterpreted and socially constructed and deconstructed. Te consequence of thisis that not only do reward systems designers and decision-takers nd themselvesconfronted with conicting prescriptions on how to derive effective consequencesfrom investment decisions. Tey also encounter alternative ways of thinkingabout the subject whether these feature explicitly in the commentary or lurkimplicitly below the surface.

Given the range of factors complementing and supplementing economic andpsychological issues, the search for guidance on how to navigate potentiallyconicting, sometimes contradictory, best practice techniques may be usefullysupported by literature assembled by employee relations and HRM analysts,political scientists, sociologists, strategic management writers and so on (alsoreviewed in the theory chapter that follows this introduction. Tese ideas andconcepts require careful interpretation and evaluation. But they may help tosituate alternative reward management principles and practices mindful of thecontext in which they have been fashioned and to which the exhortation is toapply them.

above those in Victoria. This followed rejection of a three-year pay increase of 2.5per cent.

Source: Australian Financial Review , 8 October 2010. Queensland workers in payprotest (p. 12)

Just looking at a single weeks business media coverage surfaces a host ofexamples that, when examined with the foregoing considerations in mind helpreinforce the challenge signalled. Reward management, whatever else it maybe, isnt easy: and however ideas may be put forward as solutions to rewardproblems, the astute HR professional will appraise such abstract commentarywith due caution. Effortreward bargaining as a socio-economic process requirespeople to work it out (whether this is through formalised negotiations in collectivesettings with intermediaries acting for management and workforce, or in day-to-dayinteractions between the supervisor seeking to motivate one or more subordinatesto perform to achieve the supervisors goals, or even by the individual working outmentally what and how much to do when faced with a remunerated employmentsetting).

Introducing the Reward Management System


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Tat is the case whether the context is spatial and/or temporal, related toorganisation and workforce as well as managerial characteristics, and culturaland/or institutional factors, not forgetting philosophical considerations that setthe scene for what decision-makers and their advisers think is being observedand acted on, and how knowledge to inform the process is itself constituted.

Observing these principles, it seems to us, the reader will be able to adopt athematic and theoretically grounded orientation to the subject, rather than oneoverly reliant on techniques (even when technical commentary is informed byreports of what works and what does not, gathered in real world settings).

employee reward and the employeremployee dyad

issues in reward management

Tree foundational reasons are generally given for the managerial importanceof rewarding employees: the underlying idea is to help organisations and thosewho lead them to secure, retain and motivate people (CIPD, 2006a). Employers,or managers and supervisors acting on the employers behalf, whether theyare in for-prot organisations, government agencies or other not-for-protenterprises, offer reward(s) that may be counted as representing the price foremploying labour, moderated by particular economic market conditions. Butthe employment relationship has a complex character. Employees are not sellingtheir souls as a labour market commodity (Rubery and Grimshaw, 2003: 2)but a capacity for and a willingness to work. Te relative value of economicrecognition it is deemed legitimate for an individual to expect in employmentis mediated through principles of fairness, equity, justice and respect for thehuman condition.

Because reward is about a relationship, the outcome of which is open to thestriking of a bargain (Kessler, 2001), the phenomenon is dynamic and notwholly subject to unitary managerial design or control. A formal contract maybe entered into between the parties effort for reward but the precise detailsof whether and to what extent employee effort matches managerial expectationsremain unpredictable. Managerially, performance management arrangementsmay be introduced to try to order the process, but the extent of employeeswillingness to co-operate in terms of not only membership behaviour (a decisionto join and stay with an employer) but also task behaviour (complying with

managerial expectations over completing assigned work tasks) and organisationalcitizenship behaviour (voluntarily and altruistically acting in ways that exceedmembership and task compliance) is ultimately a function of employee choice(Shields, 2007).

As we saw in the opening section, inuential voices in reward managementargue that employee reward needs to complement and reinforce a new logic oforganising (eg Lawler, 2000). Under this reasoning, reward management has tomatch the criteria for judging an organisation to be effective (ie that it achieves a


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t between the need for capabilities in co-ordinating and motivating behaviourmatched to economic market demands, on the one hand, and competencies thatdistinguish the organisation from its competitors, on the other). Simultaneously,effectiveness implies that reward management policies and processes are attunedto environmental conditions while also retaining a focus on enactment of a

specic corporate strategy.

self-assessment exercise*

Draw up a list of factors that employers and employees may hold in common in terms of rewardmanagement, and highlight areas where there is scope for interests to diverge. What are theimplications for day-to-day effortreward bargaining?

* This is the first in a series of two types of activity we invite Reward Management readers to engage in, to helpthem in actively thinking through and assessing the argument and evidence presented. This self-assessmentexercise is something that may be undertaken as part of private study; a second set of themes presented at

various points throughout the book under the heading student exercise may be appropriate as a classroomsession or, outside the formal learning environment, informally in conversation with peers or learning sets.

orientations towards workforce members

o develop prociency in thinking about and practising reward management,it helps to make connections systematically between the alternative approachesavailable to practitioners and the consequences of the choices exercised, payingattention to the context in which decisions will be taken and acted upon.Given the need to continuously renew the effort bargain, as dened above, onecontextual inuence on choices between alternative reward approaches andtheir consequences concerns the dynamic interaction between expectationsamong those involved regarding the character of their relationships. Explicit andimplicit managerial orientations towards workforce members enable employeesto perceive how their employer regards them. While it is possible that theapproach may be standardised across an organisation, it is likely that it will differto some extent at least between different workforce segments/locations/times.Te commentary organised in able 1.1 works through these basic orientations,suggesting possible consequences for the managerial reward agenda.

Te commentary in able 1.1 illustrates the nature and implications of regardingworkforce members as assets or liabilities on a human capital balance sheet. Italso casts them in the guise of customers for the employment propositions anorganisation might market, or potential allies in a reciprocal partnership (even ifin the nal analysis the employer retains residual rights over the economic valuecreated).

In the rst two orientations, employees appear either to be viewed as emotionallyinert, despite recognised potential to add value to organisational activity, or theyare perceived as a source of unwelcome intrusion into an organisational modelthat management would rather do without perhaps to replace workers withmechanisation through investment in physical technology. A third orientation


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follows the conceptual thread that if people really do represent our greatestassets, the consequence is that the employer needs to nd ways of sellingan employment brand, implying that employees hold the upper hand in thetransaction. A fourth orientation towards the workforce signals that althoughthe employer recognises the latent value in people who may be persuaded to

work for the organisation still carrying a risk that the relationship may becomeemployee-dependent (see eg Pfeffer and Salancik, 2003) both parties havechoices open to them.

A mixture of economic and socio-psychological factors may condition the choices.Rather than risk extrinsic or intrinsic contractual promises the rhetoric of whichmay fall short of the reality owing to unplanned circumstances for example,changes in investment or trading conditions that might undermine the ability topay an employer may signal an orientation in which each party to the employmentrelationship focuses on the process of reaching an accommodation, involvingcontinuous and transparent mutual reection on a holistic deal. As Herriot andPemberton (1995) argue, this may in turn require a renegotiate or exit orientation onthe part of the employee. But the task open to managerial initiative is one of settingclear rules of engagement and, by actions rather than words alone, communicatingthe potential for an employment relationship founded on mutual trust and respect.Such employment alliances imply the scope for conicting positions to arise betweenthe parties perhaps acknowledged as inevitable with a willingness to explore theroom for compromise and (possibly short-term) trade-off to secure the long-termbenets with which the partnership ideal is imbued by stakeholders.

Tis may all sound rather esoteric: ne in principle but what about thepractice? wo examples may help illustrate issues to be weighed in consideringalternatives and consequences in employer orientations towards employees.

periphery to core

One of the authors served on a large UK National Health Service rust boardof directors, overseeing a new hospital building project under public/privatepartnership commercial terms. o the great concern of employees workingin support services associated with keeping the hospital running day to day(catering staff, domestics and other ancillary workers), the project plans involvedthe UPE-transfer of their employment to the new private management partner.A potentially damaging employment relations dispute was averted when thesenior hospital administrators explained to groups of employees affected that,

in all honesty, they would always nd themselves to be peripheral workers ineffect, liabilities or second-class when viewed against the rusts cliniciansand nursing professionals. Without necessarily compromising the psychologicalcontract they believed they had entered into in joining the NHS, they wouldremain members of a healthcare partnership, but enhanced by transition to coreworkforce status in their new employment relationship.

Te implication was a basis for effortreward bargaining where their interestswere potentially advanced, not only in extrinsic reward but also in terms of scope


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Reward Management18


for recognition, personal and career development, and the sense of involvement.Irrespective of what transpired, the point is that an employer may nd decisiveaction in this case transferring a workforce segment into an outsourcedarrangement a more satisfactory option on both sides of the effort bargain thanone hampered by half-hearted managerial commitment.

promise meets practice

Te same author undertook an enquiry for a sub-set of the European partners ofa large professional services rm. During the transformation the organisation wasundergoing at the time, an announcement was made by its corporate leadershipwith great fanfare on both sides of the Atlantic that, with the explicit intentionof creating conditions in which the rms managerial and professional employeeswould adopt the highest-quality service orientation towards clients, the rmwould treat its people as clients too in their employment relationship. Teinvestigation involved focus group discussions with a cross-section of managers

and professionals across a fairly wide geographical base, one telling remarkfrom which might be interpreted as necessitating caution when top managersconsider talking up the employment promise. Te partners treat us as no morethan money-making machines, the researchers were told. Clearly, although nodoubt well-intentioned from the bridge, at deck level crew members received adistorted orientation signal.

self-assessment exercise

Two case cameo illustrations have been provided covering the liabilities and customers

segments in Table 1.1. To test your understanding, search for some company annual report andaccounts statements in which the seemingly ubiquitous people as greatest assets declarationappears in the chairmans statement or similar commentary. Then look for statements embeddedin reports, or in other sources of corporate information (eg company websites and/or analystsappraisals). To what extent do you find these consistent with the assets principle, or are thereindications of more partnership orientations? You might conduct a similar audit of your ownorganisation or one known to you.

Discussion to this point has signalled that management faces a series ofalternatives for approaching reward management as do employees. Variousconsequences follow on from adopting one or other mode of engagement with

this complex aspect of organisation and people management. Te consequencesowing from reward management choices, whether conditioned by tradition ornew logic for organising, may be viewed in terms of the nature of expectationsthe parties hold, the quality of the relationships and the underlying principlesregulating their interaction.


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a few words on our t r ipar t i te taxonomy

Tis book reviews theory and practice associated with reward managementsystems interacting with the employment relationship and effortrewardbargain. o create a thematic focus for the discussion of material assembled, the

emphasis throughout is on the alternatives that call for decision-making, carryingconsequences in each case, which may be interpreted in and conditioned byparticular and changing contexts. Before concluding the chapter with a summaryof the books overall content and structure, at this point a short statement isappropriate on what the authors intend to convey through the alternatives,consequences and context refrain.

An alternative is located in a proposition containing two (sometimes more)statements, or offer of two (or more) things, the acceptance of one of whichinvolves the rejection of the other(s). Alternative possibilities, alternativestatements of some position, may exist, open to the exercise of choice by socialactors. Decision-takers are required to make selections between alternatives,electing for one course of action over one or more alternatives. Exercisingchoice (the act of choosing) involves preferential determination between thingsproposed. A choice may be exercised managerially for example, to rewardemployees for time they commit to the employer or on their performance. Eachof the parties has a choice of how to approach the effortreward bargain, andthis is likely to be inuenced by the assumptions and priorities they bring to theinteraction and the nature of the relationship involved.

Being positioned to exercise choice locates decision-takers socially relative toothers and implies, among other things, making judgements to secure the mostfavourable (or t-for-purpose) outcome, to attain something that is worthy of

being chosen, having special value relative to other available options. Choicesare logically followed by consequences: it is an open question whether or notthe decision-takers base their selection between alternatives either on logicallyconjectured projections or by reference to empirical evidence of past outcomes,to assist the process of judgement in pursuit of a preferred outcome (ie one thatis anticipated and accords with the project being pursued by the chooser). Actorscalled to exercise choices in terms of the effortreward bargain (managers and/or employees) may be inuenced by reference to benchmark data on practicereported elsewhere or experience over time during the course of a particularemployment relationship or employment relations in general. Tey may also befaced by ideas from advisers and other opinion-formers about what is deemedtting or cost-effective in the circumstances.

A consequence may be described as something that follows as an action orcondition, effect or result, from something preceding or antecedent to thatconsequence. A consequence following a particular act of choosing may beconsidered to be predetermined (ie located within a cause-and-effect relationship).Where social relations are involved, as in the case of weighing alternatives ineffortreward bargaining, the situation is unlikely to be so clear-cut, however.While consequences may form a logical sequence starting with a specic choice,opening them to logical deduction from certain premises, a caveat is necessary.


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Reward Management20


Tat the consequence of an action, or decision to act, may be logically inferred(involving the exercise of judgement) is suggestive of a position where absolutecertainty may be open to question. Hence, logical deductions may usefully betested drawing on an existing pool of relevant empirical knowledge.

Adopting an alternative denition, choices may lead to outcomes that areof consequence that is, they are endowed with importance (assumedconsequentiality). Tey have an impact (positive or negative) on the people andcircumstances in which the choice plays out. Te corollary of this assertion isthat scope for systematic reection on inferred consequences prior to action merits the attention of parties involved in effortreward bargaining, andthose whose role is to advise them, whether as employees, managers, national/supranational government policy-makers, or other stakeholders in the complexeld of employee reward. At a minimum, systemic-looped feedback reectionand learning may help improve the quality of judgement exercised underemergent conditions.

Selection decisions between alternative effortreward bargain approaches do notoccur in isolation. In systems terms, the selections between alternatives by groupsof decision-takers interact with the choices exercised by others, and in eachcase their choices may be viewed as reecting particular interests. For example,managerial decisions to select one reward management strategy and thus rejectothers will interact with decision-taking by other groups of managers, as well asemployees who may be the targets of such decision-taking. How alternatives areweighed and acted on, and the consequences that follow, are open to inuencefrom the context (or environment) in which organisations are situated and how itis interpreted by the parties to the effortreward bargain.

Interaction between the elements perceived as systematically regulating theemployment relationship and effortreward bargain may be theorised ascontext-bound or context-free. Reference to context describes action to weaveor sew together contexted phenomena to facilitate interpretation and possiblyexplanation. If something is contextual, the implication is of a situation belongingto the context if not standing in a dependency relation with then at leastinuenced systematically by the context.

Te context for reward management and the alternatives and consequencesassociated with its determination may be framed in terms of corporate, nationaland international systems. Managerially, the scale and sector of an organisation,its predominant technological make-up (affecting the balance of emphasis in the

capabilities required to resource operations), its history and the predispositionof those who lead and make up the general membership may be viewed asbounding to some extent employee reward policy alternatives deemed legitimate.Adopting an open systems perspective, external to the organisation, contextis likely to reect the nature of its ownership, and the inuence of the variousstakeholders and other institutions with whom the organisations members maybe perceived to have a relationship such as business partners, investor groups,state regulators representing a public interest, trade unions, and so on. Also, thecompetitive environment, for sources of investment and revenue (not forgetting


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employee talent), is likely to inuence protability and the disposition ofmanagement to invest in the effortreward bargain.

It has been remarked that, over two decades, two themes abiding condencein the march of globalisation and progress have remained in the foreground(Franklin, 2006). While uncritical acceptance of this position is to bediscouraged, beyond the internal organisational setting and its immediatecontext, as noted earlier, an increasingly signicant inuence on organisationsystems, and on HRM and reward management systems, is attributed to theglobal context. A recurring theme in the literature is the question of whetheror not approaches to employment regulation are converging internationally orwhether they remain divergent, owing to the inuence of culture and institutionalfactors within particular national systems (Anakwe, 2002; Katz and Darbishire,2000; Sparrow, 1999).

Whether or not the organisation employs people across geo-ethnic borders, itmay be argued that regional and global employment systems need to be factored

in to attempts to evaluate the alternative ways of approaching the effortrewardbargain. A common governance architecture for contemporary business systemsmay be assumed (Whitley, 2000) that is, capitalist principles inform the basison which actors will seek to arrange the affairs of organisations and those of thenational and international systems within which they are situated (Coates, 2000;Furker, 2005).

Even if it is accepted that capitalism provides the dominant organising logic,however, alternative varieties of capitalism (Albert, 1992; Hall and Soskice, 2001)have been postulated, reecting the institutional basis for reaching social peaceas an antecedent of successful economic production (Roe, 2003: 1). Although adirectional convergence around particular sets of policies and practices for themanagement of organisations, including effort-bargaining orientations, may beopen to perception, nal convergence may not be reliably assumed ( regaskisand Brewster, 2006). Detailed policies and practices may reect differentinterpretations of the opportunities and limitations of the global, national andorganisational settings in which choices between alternatives are being made.Te accent may vary according to the systematic interaction between economic,historical, legal, political, social and technological factors, in turn affected bycultural and psychological factors that is, the inuence of socialisation ondecision-makers interpretations of perceived opportunities and limitations.

Te institutional context for reward management is discussed in Chapter 3 and,

specically in the case of executive reward, in Chapter 10. In-depth treatment ofthe transnational context for corporate governance and knowledge mobilisationfeatures in Chapter 11, although given its overriding inuence on rewardmanagement considerations an eye for the international dimension will remainopen throughout the volume.

In short, it is our position that understanding reward management will beassisted by attention to themes systematically arising as the parties evaluate andact on the range of alternative courses of action open to them and reection,


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Reward Management22


conceptually and empirically, on consequences that may follow from thesechoices. In the case of both alternatives and consequences the inuence ofthe open systemic context in which alternatives occur and are weighed andconsequences are played out is something that has to be accounted for in drawingconclusions, which may in turn inform policy and practice.

student exercise

Consider the argument that, owing to the scale of Western multinationals, their preferences fordetermining reward management systems will tend to prevail across the countries in which theyset up operations. To what extent can you build an alternative, or divergence, perspective? Arethe tendencies polar opposites?

chapter summary

In this chapter we have dened reward management (and employee reward),reecting on the various manifestations, and introduced the concept of theeffortreward bargain and the consequences of applying this theoretical notionwhen trying to make sense of interaction between the parties to the employmentrelationship. We have introduced a model encouraging reection on theorientations employers may adopt towards their employees when evaluatingreward alternatives and the consequences implied, positing four possiblescenarios. We have also briey appraised the merits and criticisms of applyingsystems thinking when conceptualising reward management. Commentary ondevelopments in the corporate, national and international context for reward

management has been briey appraised to situate alternative reward managementdesigns and the consequences that may follow from selected applications.

For postgraduate students following a specialist Reward Management module,the book can be used sequentially. Chapters have been written mindful ofthe Performance and Reward elements in the CIPD Profession Map, and wesummarise how the text aligns with them at the beginning of each chapter. Wehave designed the content and style of the book to support CIPD-related studentsin particular but also, we hope, to be of relevance to other readers interested inthis important subject associated with people at work and their management.Students of general management and those following nal-year undergraduateand postgraduate HRM programmes may nd it benecial initially to engage

with Part One, in order to locate selective engagement with subsequentcontent, depending on specic interests or assigned work. Troughout the bookcommentary is illustrated, using calls for self-assessment and other exercises,to inform discussion of issues raised. Te intention is also to assist readerspreparation in addressing examination questions. Case study material appearsat various points to illustrate conceptual arguments. o conclude the presentchapter, an outline plan of the structure and content of the overall text is set outbelow.


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plan of the book

Te book is structured in four parts over 12 chapters, including this Introduction.

part one

Part One deals with concepts, theory and the institutional context for employeereward management alternative approaches and consequences.

Although conceptual and theoretical frameworks inform the treatment of rewardmanagement throughout the book, in Chapter 2 particular attention is devotedto the principal attempts to theorise the subject. Acting as a reference point forwhat follows in subsequent chapters, models may be identied drawing on amultidisciplinary academic literature principally (labour) economics, industrial/organisational psychology, employment relations, management strategy, andthe sociology of organisations and work. Emerging themes include the extent towhich employee reward is something open to management; assumptions aboutpeople and work motivation under conditions of employment; and the socialand political interactions around the effortreward bargain. Te content of thischapter also enables us to signal themes traced throughout the volume relatedto how notions of equity and social justice, diversity and its management, andthe possible implications of a global economy interact with ideas and practicesmaking up the reward management eld.

A complementary foundational discussion this time covering the legal andemployment relations environment is presented in Chapter 3 . Te materialincludes the impact of principal legislation and related regulatory developmentsaffecting reward management, beyond economic market inuences, along withthe role of collective bargaining where applicable. Te increasing impact ofEuropean legislation on UK reward management systems design is specicallyconsidered, illustrating the dynamic nature of the institutional environment formanaging reward.

part two

Part wo introduces and evaluates structures and processes for extrinsic rewardmanagement, describing some of the practicalities of their design and operation.

Te basic architecture of pay systems is the focus of Chapter 4 . Descriptions ofand arguments for applying pay structures are examined, including alternative

types of pay structure, and conditions affecting their design and operation.Many pay structures are underscored by an aspiration to create the conditionsfor internal equity. Te objective has become even more important with thedevelopment of anti-discrimination regulatory frameworks. Te concept, role,alternative approaches and administration of job evaluation are discussed,together with its impact on pay structures. Debate surrounding job or roleanalysis as the basis for structuring pay, as well as questions and practicalitiesregarding the alignment of pay structures with external markets for jobs andpeople, is appraised.


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Reward Management24


Alternative approaches to base pay determination, salary progressionmanagement and their consequences are reviewed in Chapter 5 . Wages systemsand salary systems are compared, as are seniority- or service-related pay versuspay contingent on inputs (eg skills) or outputs (eg preset target achievement) orcombined under the rubric of contribution-based pay. Te critical part played

by performance management and the centrality of line managers to the processof managing contingent pay systems is reviewed. Te role of compensatorypayments for working exibly, in particular beyond contracted basic hours,administered either in piecemeal form or by applying alternatives such asannualised hours, is assessed. Te practice of augmenting pay using conceptssuch as premiums related to specic employment markets is also discussed.

Beyond time-based systems, the notion and variety of variable pay (as aperformance-motivating incentive or reinforcement device) is reviewed inChapter 6 . Short-term and long-term, individual, team and organisationalbonus payments, including prot-related pay and prot sharing, gain-sharing,as well as equity- (share-)based nancial participation initiatives that may beapplied to some or all workforce segments are described and evaluated. Tediscussion includes sales bonuses and other incentives for particular workforcesegments.

part three

Part Tree reviews principles, policies and frameworks for non-cash benets,deferred remuneration and intrinsic rewards, and alternatives to managing them.

Employee benets and allowances, and policies for their application, are thesubject of Chapter 7 . ypologies of benets welfare, compensatory or status

and types of benets single-status and harmonisation, exible (or cafeteria)systems are appraised. Te principal employee benets that may be appliedbeyond salary and wages and their roles (eg legal minima versus perks) arediscussed. Te interrelationship between employee benets and taxation andsocial insurance systems which vary signicantly according to the nationalcontext is reviewed.

Given its increasingly contentious and strategic role within employee reward,Chapter 8 is devoted to debates around pensions a deferred form ofremuneration. Consideration begins with a discussion of the development androle of superannuation schemes, situating the topic in a historical perspective,moving to examination of the contemporary and contested role of the state vsemployers vs private insurance providers in employee retirement provision. Temain types of pension scheme are introduced, linked to their role within a rewardmanagement programme. Government policy intervention and the future ofpensions provision are also analysed.

Te increasing attention directed towards forms of non-nancial reward focusesdiscussion in Chapter 9 . Te concept is dened and related to notions of totalreward, the employment proposition and emerging ideas around employeeengagement, aligning extrinsic reward management with management of the


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psychological contract. Te question of why this factor may be of increasingimportance in reward management is investigated, accounting for issues such asemployee recognition, workforce diversity and its consequences, as well as careermanagement and employee involvement initiatives.

part fourPart Four gives specic attention to rewarding employees who have a directinuence on corporate governance, as well as the employee reward implications oforganisational expansion requiring transnational knowledge mobilisation. Finally,attention turns specically to questions around alignment between organisationalstrategy, HRM and employee reward management.

Rewarding corporate executives and directors is discussed in Chapter 10 . Ideason the composition and management of reward for employees occupying seniormanagerial roles are reviewed. Tis discussion is complemented by engagementwith the corporate governance and increasingly emotionally charged top paydebate, including the role of remuneration committees and advisers; executiveincentives (short-term and longer-term approaches, cash- and/or equity-based);executive benets and perquisites; contractual conditions; compliance and publicdisclosure requirements. Attention is paid to corporate governance developmentsfollowing on the controversy about incentive pay in nancial services and theoutcome of the recent global nancial crisis.

Developments in international reward management are appraised in Chapter 11 .Factors impacting on the design of transnational reward management systems areassessed. Questions around globalisation and corporate structure propositions,focused on knowledge mobilisation, are considered, along with the extent to

which these give rise to standardisation in reward management practice acrossmulti-local environments, as well as the part played by reward managementsystems in supporting employee expatriation programmes. Expatriatelocalreward management opportunities and threats in the competitive climate formultinational enterprise are also critically reviewed. Te emerging role ofinformation technology in communicating and calibrating international rewardpractice is introduced.

o conclude the book on an integrative and thematic note, Chapter 12 covers thereward management-HRM axis. Te growing importance of a strategic approachto people management in general and reward management in particular, with afocus on vertical integration along one dimension, complementing horizontalintegration along another, to ensure consistency across the range of peoplemanagement policies and practices, is highlighted. Contested literature, whereuniversal best practice thinking meets more contingency-based and criticalcommentary, is reviewed. Roles attributable to the parties to employee rewardmanagement systems in particular, the interface between specialists and linemanagers under the HRM rubric are appraised.


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Reward Management26

A free sample chapter from Reward Management , 2nd Edition by Stephen J Perkins and Geoff WhitePublished by the CIPD.C i h CIPD 2011

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S

For a discussion comparing and contrasting prescription, empirical evaluation,critical materialist and post-structuralist commentary, see Shields, J. (2007)Managing Employee Performance and Reward: Concepts, practices, strategies .Cambridge: Cambridge University Press.

For a critical appraisal of debates around the imperatives of reward strategy asthough this were an alternative to managing equity-based factors implicit in theeffortreward bargain, see Kessler, I. (2007) Reward choices: strategy and equity,in Storey, J. (ed.) Human Resource Management: A critical text , 3rd edn. London:Thompson: 15976.

For a treatment of employment systems contexts, see Rubery, G. and Grimshaw, D.(2003) The Organization of Employment: An international perspective . Basingstoke:Palgrave Macmillan.

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